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Title: Innovation and Growth with Rich and Poor Consumers

Author(s): Johann K Brunner and Josef Zweimüller

Publication Date: April 1998

Keyword(s): Growth, Inequality, Innovation and Product Quality

Programme Area(s): Human Resources

Abstract: This paper studies the impact of income inequality on the level of innovative activity in a model where innovations result in quality improvements. The market for quality goods is characterized by a natural oligopoly with two types of consumers ? rich and poor. In general, we find that for reasons of strategic price setting a more equal distribution is favourable for innovation incentives. This is consistent with empirical evidence, suggesting that countries with a more equal distribution have grown faster.

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Bibliographic Reference

Brunner, J and Zweimüller, J. 1998. 'Innovation and Growth with Rich and Poor Consumers'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1855